Page 18 - The European Business Review

Strategy

world of vastly larger demand and value release. That ,Q WKH ÀUVW TXDUWHU RI :H&KDW 3D\ DFFRXQWHG
type of value mindset made sense when companies for 40 percent of the market.
competed more as single entities going head-to-head Importantly, releasing trapped value in a legacy
against others in an industry. But today, companies are business creates investment capacity required to
increasingly partners, not simply competitors, and are support an incumbent’s innovation efforts in other
participants in broad ecosystems, not just traditional indus- areas. In fact, our research has found that companies that
tries. It’s “coopetition” in the fullest sense. Even consumers are innovate pervasively – for their legacy businesses and for
becoming part of these ecosystems. One way is by acting as new ventures – report stronger performance than compa-
“prosumers” – for example by sending electricity back to the nies that innovate only selectively in one area or the other.
grid from their solar panels. In the industry. Value is trapped in an industry when
So, if your position is – “This is the value we create and only a few companies are reaping rewards in a marketplace
capture for our company today; the market will reward us” – ZKHUH PDQ\ PRUH FRXOG EHQHÀW ,W DOVR H[LVWV ZKHQ LW ZRXOG
you’ve already lost. take more than one company to deliver an infrastructure
improvement that could and would reward many more.
Value Visionaries Consider how Volkswagen, BMW, Daimler and Ford
The high performers in our study, those that target and create joined together to create “Ionity” – a network of over 400
value growth most consistently, think about value differ- high-power charging stations for electric vehicles across
ently. They are value visionaries, acutely aware that releasing Europe, which will use the Combined Charging System (or
YDOXH KDV D Á\ZKHHO HIIHFW 7KLV DZDUHQHVV KHOSV WKHP VSRW CCS) standard. This move is critical to accelerating demand
opportunities for value creation where others do not – and to for electric vehicles, in a market that is expected to reach
convert opportunities into reality where others cannot. UberX, 56 million vehicles in circulation by 2030, 28 times the 2016
for example, was estimated to have generated $2.9 billion stock, even under a low-growth scenario.
in consumer surplus in its four biggest US markets in 2015 For the consumer. Consumer trapped value gener-
– Chicago, Los Angeles, New York, and San Francisco – equiv- ally exists where there is latent demand for something that
alent to more than six times its estimated revenues generated in consumers themselves actually own in abundance, and under-
these cities. (For a more comprehensive example, see “Illumina utilise. Airbnb was founded on the idea that there was latent
Releases Value Consistently and Broadly”. ) demand for less expensive and more convenient lodging –
To see just where and how other high performers do this, and enormous untapped stores of such lodging owned by
we need to explore in more detail the four main areas where other consumers who were willing to monetise those assets.
trapped value resides. It thrives on the consumer value being released for travellers,
In the enterprise. In any given enterprise, value can be and for individuals who had vacation homes or apartments
trapped by an overreliance on traditional business models sitting empty or who were previously incurring higher costs
and capabilities. Value visionaries overcome this challenge to attract and secure renters. Airbnb is estimated to have
by innovating on top of their core capabilities. Tencent, a captured $2.5 billion in revenue between 2010 and 2016. But
leading provider of Internet value added services in China, it is estimated to have released $20 billion in host revenue.
offers an example: the company’s WeChat messaging app, Similarly, transportation technology companies have
released in 2011, has more than 900 million active users. tapped into latent consumer demand for more convenient
But Tencent unlocked a torrent of additional value when ways to travel locally. Grab, the leading on-demand
it began using its social media services to facilitate mobile transportation and mobile payments platform in Southeast
payments. The volume of mobile payments in China reached Asia and its highest-valued tech company, has attracted not
$8.6 trillion in 2016, compared with just $112 billion in America. only freelance drivers but also experienced taxi drivers. In
late October 2017, Grab completed one billion rides across
Value is trapped in an industry when only Southeast Asia. With over 2.1 million drivers and upwards of
72 million consumer app downloads, we estimate that Grab
a few companies are reaping rewards in a
has helped generate monthly net income of approximately
marketplace where many more could benefit. US$2,200 per driver.